'No charges' against headteacher in cash-for-honours row

The headteacher arrested over the cash-for-peerages scandal was yesterday told he will not face charges as the police probe centred on Downing Street.

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Crown Prosecution Service officials said there was not enough evidence to charge Des Smith over claims he promised honours to wealthy sponsors of Labour's city academies.

But Scotland Yard made clear that Tony Blair's closest advisers were still under the spotlight by saying the 'wider police investigation is ongoing'.

The Government's most senior civil servant Gus O'Donnell waded into the affair yesterday by insisting Downing Street had "cooperated fully" with police.

In an extraordinary intervention for an independent mandarin, the Cabinet Secretary hinted at the panic gripping Whitehall and Downing Street by describing media coverage of the scandal as "deeply worrying".

Mr Smith, who was an adviser to Tony Blair's flagship academy scheme, said he was relieved his ten month ordeal was over.

The 60-year-old was hung out to dry by Cabinet Ministers after allegations broke that he offered gongs - despite a lifetime of public service.

But after the case was dropped yesterday, Downing Street declined to praise Mr Smith for the good work he had done promoting city academies.

The move meant the focus of the police inquiry was now solely on No10. Mr Blair's director of government relations Ruth Turner and chief fundraiser Lord Levy are still on bail after being arrested on suspicion of a cover-up.

There were reports that Mr Blair's chief of staff Jonathan Powell faces being interviewed under caution for a second time over the conspiracy claims.

All of those arrested or interviewed deny wrongdoing and no charges have been made.

Mr Smith was the first person to be arrested in connection with the inquiry after he allegedly told an undercover reporter that backers to city academies could be rewarded with honours.

He was held for eight hours in a police cell and in an interview with the Mail on Sunday in December described how the ordeal led him to consider suicide.

The CPS said yesterday although Mr Smith had made "indiscreet" comments to the undercover journalist, this was not evidence of an attempt to obtain cash for honours.

In a statement the CPS said: "Mr Smith's case concerned funding for City Academies. It did not involve allegations concerning loans or donations to political parties.

"We do not expect any further evidence to come to light relating to him.

"Although it is clear that Mr Smith made some indiscreet comments to an undercover journalist, his conversations did not provide evidence that he was trying to obtain funding for City Academies in exchange for honours.

"Police enquiries relating to Mr Smith have been completed and the CPS is therefore in a position to take a decision on his case."

Speaking from his home in Redbridge, east London, Mr Smith said: "It's just been going for so long. I'm relieved that it's over.

"It was nonsense from the beginning."

Mr Smith refused to comment on whether the charge meant others caught up in the affair may not face honours charges, adding: "I have my own views but there could be further action so I don't want to say anything."

Following the announcement, Scotland Yard said: "The wider police investigation is ongoing and as a result there will be no further police comment at this stage."

Scottish Nationalist MP Angus MacNeil, whose complaint sparked the police investigation, said he was not surprised that Mr Smith was not going to face charges.

"I think he's been out of the picture for quite a while. He's on the periphery of the whole thing," he said. "The inquiry seems to be centring on Downing Street."

The New Labour establishment distanced itself from Mr Smith after the story alleging his offer of honours broke in January last year.

In chilling echoes of the way Dr David Kelly was treated by Labour, John Reid said Mr Smith did not have "authority" to speak on behalf of the Government.

Mr Blair's spokesman was asked yesterday whether he would now praise Mr Smith's years of public service to education and his work on getting sponsors for city academies - but refused to take up the offer.

Giving evidence to the Public Administration Committee, Cabinet Secretary Sir Gus revealed the extent of panic in the Government over the way the investigation was going.

He insisted the Government was "getting on with things" as usual, and was not being hindered by the controversy, but added: "I find it deeply worrying just how much media coverage there is. That's all I can say."

Questioned on whether detectives had been given full access to all documentation, Sir Gus said police had accepted that they were receiving full cooperation previously.

"There's no reason to think that's changed," he added. "We've complied fully with all requests."

He also denied the existence of a second email system inside No10. But Whitehall sources insist that No10 officials have access to a separate system which is operated from outside.